With a new government in place, the new Chancellor of the Exchequer, Kwarsi Kwarteng today delivered his "mini-budget" with the aim of stimulating growth in the UK economy. He delivered this against the backdrop of a recession as reported by the Bank of England (BoE).
The new Chancellor's main priorities of the government are:
  • Maintaining responsible public finances
  • Reforming the supply side of the economy
  • Cutting taxes to boost growth.
This “mini-budget” was called by Paul Johnson, the Director of the Institute for Fiscal Studies (IFS) “the biggest tax-cutting event since 1972”. The highlights of this “mini-budget” were:
  • The increase in Corporation Tax rise from 19% to 25% in April 2023 has been cancelled. This means that the UK will have the lowest rate of Corporation Tax in the G20 and will result in £19 billion for businesses to utilise as they see fit.
  • The cut in Income Tax will be brought forward to 2023. So, from April 2023, the basic rate of Income Tax will be cut from 20% to 19%. This means that taxpayers will have more than £5 billion a year to save or spend and be better off by an average of £170 a year.
  • There was the surprise of the abolition of the 45% additional rate of Income Tax from April 2023 and applies across all income  for taxpayers in England, Wales, and Northern Ireland. Therefore, from April 2023 there will be a single higher rate of Income Tax of 40%. 
  • Prior to the mini-Budget, the Chancellor had announced the reversal of the 1.25% National Insurance increase. The Health and Social Care Levy, which was to replace this 1.25% increase rise in April 2023, has also been scrapped. The change will take effect on 6 November 2022. 
  • Employees will enjoy a reduction too. From the BBC we learned that somebody earning £20,000 will save about £93 a year, and somebody earning £100,000 will save £1,093, compared to now.
  • Shareholders will also see the Dividend Tax rise reversed. The Chancellor also announced the reversal of the 1.25% point increase in Dividend Tax rates from 6 April 2023. Additionally, the ordinary and upper rates of Dividend Tax will be reduced to 2021/22 levels (respectively 7.5% and 32.5%).  
  • House buyers will see a cut in Stamp Duty. The aim of this is to encourage economic growth by enabling more people to move, and helping first-time buyers to get on the property ladder. To this end, it was announced that, with immediate effect, no Stamp Duty will apply to the first £250,000 of a property purchase, enabling a second-time buyer to save £2,500 when they purchase a house valued at more than £250,000. The Chancellor also announced an increase in the threshold at which first-time buyers start paying Stamp Duty to £425,000. It increased the value on which they can claim relief from £500,000 to £625,000.
  • New investment zones will be created. It was announced that the government will work with the devolved administrations and others to introduce “investment zones” across the country. Discussions have already began with many local authorities and businesses in such zones will be able to benefit from special tax breaks reliefs for buildings and  qualifying investments in plants and machinery. The benefits available also include no Stamp Duty on newly occupied business premises, no business rates to pay on new premises and, if a business hires a new employee in the investment zone, the employer will pay no National Insurance contributions on the first £50,000 of their earnings.
  • Perhaps more controversially, the Chancellor announced the removal of the bankers’ bonus cap, saying that “All the bonus cap did was to push up the basic salaries of bankers, or drive activity outside Europe. It never capped total remuneration, so let’s not sit here and pretend otherwise. So, we’re going to get rid of it.”
There were other measures announced and these included:
  • Venture Capital Trusts (VCTs) and the Enterprise Investment Schemes (EIS) are to be extended.
  • The wind-down of the Office of Tax Simplification.
  • For businesses, the Annual Investment Allowance will remain £1 million and not reduce (back) to £200,000 in March 2023, giving 100% tax relief to businesses on their plant and machinery investments up to the higher £1 million limit.
  • IR35 rules will be simplified, and the government will repeal the 2017 and 2021 reforms.
  • The cancellation of the planned rise in alcohol duty was announced, along with reforms to modernise alcohol duties.
If you have any questions about how the mini-Budget might impact on you, please feel free to contact your Dentons Wealth Adviser.

The source of this information is the Growth Plan 2022 document. The content of this “mini-Budget” summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice. While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.
Although every effort has been made to ensure that the information provided in this article is accurate and correct, the information provided does not constitute any form of financial advice. We recommend that you take financial advice before making any financial decisions.